David Foster

“Protocols” and Wealth Creation

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Here’s David Brooks, writing in The New York Times:

In the 19th and 20th centuries we made stuff: corn and steel and trucks. Now, we make protocols: sets of instructions. A software program is a protocol for organizing information. A new drug is a protocol for organizing chemicals. Wal-Mart produces protocols for moving and marketing consumer goods. Even when you are buying a car, you are mostly paying for the knowledge embedded in its design, not the metal and glass. (via Isegoria)

Read the whole thing. The argument that Brooks is making here is very similar to the argument made by Rich Karlgaard of Forbes, which I critiqued in my post myths of the knowledge society.

In summary: The 19th and 20th centuries were also “knowledge economies” (in Karlgaard’s formulation) or “protocol economies” (in the Brooksian terminology). The value of a Boulton & Watt steam engine was not in the “stuff” it was made out of (which could be purchased for a far lower amount than you would pay for the steam engine itself) but rather for the design knowledge contributed by James Watt and the manufacturing process knowledge (protocol knowledge) contributed by Matthew Boulton..and for innumerable additions to that knowledge base by their employees. To take a more recent example, the early 20th century assembly line as implemented by Henry Ford, and the kinds of precise work planning and industrial engineering developed by Taylor and the Gilbreths, certainly represent “protocols” just as much as do Wal-Mart’s supply-chain management procedures.

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Paying Higher Taxes Can Be Very Profitable

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Chevy Chase, MD, is an affluent suburb of Washington DC. Median household income is over $200K, and a significant percentage of households have incomes that are much, much higher. Stores located in Chevy Chase include Tiffany & Co, Ralph Lauren, Christian Dior, Versace, Jimmy Choo, Nieman Marcus, Saks Fifth Avenue, and Saks-Jandel.

PowerLine observes that during the election season, yards in Chevy Chase were thick with Obama signs–and wonders how these people are now feeling about the prospect of sharp tax increases for people in their income brackets.

The PowerLine guys are very astute, but I think they’re missing a key point on this one. There are substantial groups of people who stand to benefit financially from the policies of the Obama/Pelosi/Reid triumvirate, and these benefits can greatly outweigh the costs of any additional taxes that these policies require them to pay. Many of the residents of Chevy Chase–a very high percentage of whom get their income directly or indirectly from government activities–fall into this category.

Consider, for starters, direct employment by the government. Most Americans still probably think of government work as low-paid, but this is much less true than it used to be. According to this, 19% of civil servants now make $100K or more. A significant number of federal employees are now making more than $170,000. And, of course, the more the role of government is expanded, the more such jobs will be created, and the better will be the prospects for further pay increases.

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Freedom and Control, in Teheran and in Washington

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Large numbers of people in Iran are taking huge risks in an attempt to free themselves from a despicable regime. There are many horrifying reports and images available on the web demonstrating clearly the levels of brutality that the regime is willing to use in suppressing dissident voices: see for example here and here.

Barack Obama’s expressions of condemnation for the regime and support for the dissidents have consistently been a day late and a dollar short. He eventually says what he thinks he is expected to say, but there’s not much fire in it. He comes across like an IRS official reciting some section of the tax code for the 495th time, or, at best, like a student giving a report on some long-ago historical event that he really didn’t want to study study but which was important for his grade. His genuine passion has been reserved for domestic issues.

As Joshua Muravchik has pointed out, the current administration has been much less focused on international issues of human rights and democracy than has any other administration in decades. Why?

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Nicely Put

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The current Barrons (12/28) has an interview with fund managers Kevin Duffy and Bill Laggner, two guys who seem to have a gift for expressing themselves well and concisely. A few excerpts:

Barron’s: You’ve said that perhaps the most redeeming feature of capitalism is failure. Please explain.

Duffy: Any healthy system needs a way to correct error and remove waste. Nature has extinction, the economy has loss, bankruptcy, liquidation. Interfering in this process lengthens feedback loops. Error and waste are allowed to accumulate, and you ultimately get a massive collapse.

Capitalism is primarily attacked by two groups: utopians who wish to impose a more “compassionate” system, and political capitalists who want to enjoy the fruits of success without bearing the pain of failure. They use the coercion of the state to gain privileges, at the expense of everyone else.

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Important Reading

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Nat Hentoff is a man of many talents–columnist, historian, jazz and country music critic (jazz and country music? that must be an unusual combination)–he is best known as a civil libertarian. As such, he has had his differences with all administrations. But he is particularly concerned about the behavior and attitudes of the current one.

Read this interview for his reasons.